Midday net up 79% in FY01 - Views on News from Equitymaster

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Midday net up 79% in FY01

May 11, 2001

Mid-Day Multimedia Ltd.(MML) has posted a net profit of Rs 86 m for the year ended March 31, 2001 as compared to Rs 48 m in the same period last year. Though on a year on year basis, operating margins have improved by 50 basis points, they were slightly under pressure in the fourth quarter due to a flare up in newsprint prices, which went up by 30%.

(Rs m) FY00 FY01 % Change
Sales 520 950 82.8%
Other Income 7 13 91.2%
Expenditure 437 794 81.7%
Operating Profit (EBDIT) 83 156 88.4%
Operating Profit Margin (%) 15.9% 16.4% 3.1%
Interest 5 10 112.8%
Depreciation 16 29 84.7%
Profit before Tax 69 130 87.9%
Tax 21 44 107.5%
Profit after Tax/(Loss) 48 86 79.2%
Net profit margin (%) 9.2% 9.1%
No. of Shares (eoy) (m) 27 34
Diluted Earnings per share 1.8 2.5
P/E (at current price) 18.0 12.7

The business model of the company is built around four business divisions viz, publishing , outdoor advertising, radio and interactive/IT enabled services. The publishing division of MML has four newspapers and a magazine. The prominent newspapers are Mid-Day in english (which comes out with three editions daily) and Gujarati Mid-Day. MML now plans to launch Mid-Day Marathi. Venturing into multi-lingual tabloids helps the company in leveraging the content creation costs.

In the Outdoor advertising business the company currently has over 1 m sq. foot of outdoor space covering over 35,000 sites and has exclusive rights for advertisements on 2,038 bus shelters, 33,000 electric pole kiosks and certain railway stations for varying periods. In the radio business, MML has bought FM licenses for Mumbai, Delhi and Chennai. The licenses have been under the name of three subsidiaries of MML to minimise risks and to rope in partners for this business, if required. This being a risky venture, the company has decided to limit its exposure to Rs 150 m.

The company also has Internet services catering to Mumbai. Chalomumbai.com, is its city-centric portal. It uses the existing information archive to deliver news and information on Mumbai. Chalomumbai.com plans to utilise the content library of the company and plans to set up an interactive telephone information service. A Geographic information service (GIS) project exclusively for Mumbai is also in the offing.

Though, the newsprint prices have started showing a reverse turn from April'01, the company's profitability still depends on this essential raw material. Further, in the medium term the company's ambitious plans in the interactive/IT enabled services are not expected to generate revenues, thus putting a strain on the ROCE.

At the current market price of Rs 32, the stock trades at 13 times its fully diluted FY01 earnings.

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